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L&G with-profits returns slump following new business closure

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Pre-tax investment returns generated by Legal & General’s with-profits funds dropped to 3.1 per cent in 2015, down from 10 per cent a year previously.

This compared to 8.5 per cent over 25 years and 5.5 per cent over the last decade.

In addition, the insurer added bonuses totalling £366m to its with-profits policies last year, a fall of £21m on 2014.

L&G closed its with-profits funds to new business a year ago following a slump in sales post-RDR.

It says the lower bonus payments reflecting “a gradual reduction in the number of customers as policies continue to mature”.

L&G managing director of savings Jackie Noakes says: “One of the main advantages of a with-profits investment is the ability to protect our customers against short-term market volatility by ‘smoothing’ payouts.

“2015 was a challenging year for investment markets but we have actively allocated the fund across a broad spread of assets achieving another year of positive returns. This means that our with profits customers continue to see steady growth on their investments over the long-term, well in excess of inflation.”

The firm says a pension policy with a 15-year term for a male retiring at 65, and making £200 monthly contributions, has a retirement value of £56,253.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Back in the 1980s I recall there was a perceived benefit in being invested in a closed With Profits fund, as it all had to be eventually distributed to fewer and fewer policyholders.
    What`s changed?

  2. Philip, the answer is nothing has changed. A lot of WP payouts are being plumped up buy big additions of surplus. The article is misleading. The aggregate value of bonuses is falling because the numbers of policies is falling. But the bonuses per policy isn’t. A subtle disctinction I think you will agree is lost here.

    I wrote a long diatribe comment explaining that, amongst a lot fo other things, but because I was unduly critical of some, quite frankly misinformed reporting it appears to have got censored.

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